Wednesday, June 25, 2014

Let Them Eat Beans!

I’ve mentioned the Book Average Is Over many times before, and here, finally, is my review. The author of the book, Tyler Cowen, is an economics professor at George Mason University, and is affiliated with the Mercatus Center, a neoliberal/market oriented think tank (and yes, there is Koch brothers money involved here). He is also maintains the excellent Web Site Marginal Revolution (with Alex Tabarrok), one of the few libertarian blogs worth reading, and considers himself a “small-L” libertarian.

Despite these dubious affiliations, he is an idiosyncratic thinker, and not afraid to wander off the libertarian reservation, which makes him worth reading, unlike many of his peers who are simply courtiers and propagandists. He is best known before this book The Great Stagnation, which argued (against the libertarian party line*) that slower American economic growth results from harvesting the low-hanging fruits of innovation, and new inventions are useful, but don’t add up to as much GDP growth as past innovations**. However, he has the obligatory silver lining, arguing that this is only a temporary rough patch and things will get better in the future (a standard in his work; he will make the same argument in Average, as we shall see). He is usually mentioned in the context of stagnationist arguments, although economists like Robert Gordon have stolen much of his thunder, following such conclusions much further, and being much more pessimistic about future growth.

“In a world where, as I’ve argued, average is over — the skills required for any good job keep rising — a lot of people who might not be able to acquire those skills can still earn a good living now by building their own branded reputations, whether it is to rent their kids’ rooms, their cars or their power tools.”

This paragraph reads like a Zen koan pieced together from cast-away fragments of motivational sales speeches. We’re left to infer the meaning of its more obscure phrases from their context, the same way World War II code breakers cracked particularly difficult passages in enemy telexes. So let’s try to tease out its meaning, phrase by phrase:

“In a world where, as I’ve argued, average is over …” (Emphasis from the original.)

“Average is over”? Averaging is a mathematical function, inextricably woven into the fabric of reality as we understand it. How can it be over? It’s like saying that subtraction is over, or means and medians are null and void. (Watch yourself, standard deviation. Thomas Friedman has his eye on you.)

What’s he really saying here? The “as I’ve argued” offers one clue to motivation, if not meaning: Anything self-referential from this author – and that’s a lot – is a signal that he’s floating another potential “The World Is Flat” book title.

But what’s he saying? Our context-driven code-breaking takes us to the next phrase:

“… the skills required for any good job keep rising …”

Ah, I see. “Average is over” is connected to job skills. Friedman apparently means that you can’t get a good job anymore if your skill level is only average.

Why didn’t he just say so?

Well, Tyler Cowen used the book title, not Tom Friedman, and that is exactly what he's saying. Since most of us, by definition are average (I know I am), we are “over.” What he means is that anyone who is not “above average” can kiss any kind of stable, prosperous existence goodbye in the new world of corporate libertarian capitalism. That is the core message of the book. I found this comment to a recent MR post a good summary:

Consider
the bell curve distribution of IQ in the general population. Now
consider a curtain being drawn across that graph from stage left. As
that curtain, which represents technological advance, blankets a
population segment, it renders them useless in terms of economic
competitiveness.

We didn’t
much care when this impacted those with an IQ < the mean, but the
curtain's leading edge is now at 1 σ above the mean, and accelerating to
the right. How long till you and your family are also rendered useless?
You will mistakenly overestimate that value.

Basically in addition to Friedman, it rides on the back of the work of MIT economists Brynolfsson and McAfee (and to a lesser extent David Autor), arguing that automation will disrupt much of the workforce through robots and smart machines (the self-driving car gets particular mention). The book dismisses starry-eyed notions of a singularity or post-scarcity, and instead makes the case that people laboring complementarily with machines is the wave of the future, using something called “freestyle chess” as an example*** where teams are allowed to make use of computers in tournaments, yet still make the executive decisions themselves****. Computers will also lead to a lot of low-cost or free services like education. The book claims that people who are conscientious, disciplined, and highly social will prosper due to these developments, while those who are not will experience falling living standards and precariousness. The book provocatively argues that women, who generally rate higher on conscientiousness (I would say docility and malleability) and are generally more sociable will be the big winners and men the big losers (also indicated by falling rates of men graduating from college). In other words, the way he sees it, the benefits of digital technology will not be broadly shared among the American people, as some optimists claim, but instead accrue to a tiny elite that owns the machines, in line with the more pessimistic vision.

"It's clear: The world is demanding more in the way of credentials, more in the way of ability, and it is passing along most of the higher rewards to a relatively small cognitive elite. After all, the first two categories of earnings winners--namely those with advanced degrees--account for only about 3 percent of the US population"

What this means is that a small slice of the American workforce will be wildly successful, living “like today’s millionaires” – Cowen puts this number as 10-15 percent of the American workforce. As for the rest of us, well, the outlook is not so good. While he never uses the new portmanteau term “precariat” this is exactly what he’s describing. The vast majority will be marginally attached to the workforce with intermittent and temporary employment, enjoy few or no benefits, no upward mobility, little chance to accumulate wealth or savings, or even gain a modicum of stability or job security. Shared prosperity will be a distant memory. Some workers will even be "zero marginal product" workers - unable to be hired at any price. Cowen speculates the arrival of vast shantytowns and slums outside American cities, including “off the grid” living in tents and mobile homes for many. The middle classes will be hollowed out leading to a society of spectacularly rich and oceans of desperate poor, very similar to Latin America or Southeast Asia. In other words, Inequality, already at Great Depression levels, is just getting warmed up, says Cowen.

"We will move from a society based on the pretense that everybody is given an okay standard of living to a society in which people are expected to fend for themselves much more than they do now. I imagine a world where, say 10 to 15 percent of the citizenry is extremely wealthy and has fantastically comfortable and stimulating lives, the equivalent of current-day millionaires albeit with better health care.""Much of the rest of the country will have stagnant or maybe even falling wages in dollar terms, but a lot more opportunities for cheap fun and also cheap education. Many of these people will live quite well, and those will be the people who have the discipline to benefit from all the free or near-free services modern technology has made available. Others will fall by the wayside.""It will become increasingly common to invoke "meritocracy" as a response to income inequality, and whether you call it an explanation, a justification, or an excuse is up to you. Since the self-motivated will find it easier to succeed than ever before, a new tier of people from poor or underprivileged backgrounds will claw their way to the top. The Horatio Alger story will be resurrected, but only for those segment of the population with the appropriate skills and values, namely self-motivation and the ability to compliment the new technologies...This framing of income inequality in terms of meritocracy terms will prove self-reinforcing. Worthy individuals will in fact rise from poverty on a regular basis, and that will make it easier to ignore those who are left behind....what does that mix of values mean for actual social choices? We'll pay for as much of a welfare state as we can afford to, and then no more."

There are a few things computers can’t do, he says, and one is come up with good marketing ideas to sell to the new rich class. Because only a small slice of America will have a job or reliable income, everyone will want a piece of them, so Cowen sees marketing to this new elite as a major job of the future. Due to vast disparities in power and wealth, people will be aggressively clamoring for any moment of time or spare dollar from the wallet of the elites – he uses the analogy of a billionaire rolling in a limousine through the streets of Calcutta, and anyone who has stepped off the plane in a poor country and been immediately inundated with salesmen and con artists can relate (except those people will now be us).

"Despite all the talk about STEM fields, I see marketing as the seminal sector for our future economy...If you imagine two wealthy billionaire peers sitting down for lunch, their demands for the attention of the other tend to be roughly equal. After all, each has a billion dollars (or more) to spend and they don't need to court each others for favors so much...Compare it to one of those same billionaires riding in a limousine, with open windows, through the streets of Calcutta. A lot of beggars will be competing for the attention of that billionaire, and yet probably the billionaire won't much need the attention of the beggars. The billionaire may feel overwhelmed by all of these demands, and yet each of these beggars will be trying to find some way to break through and capture but a moment of the billionaire's attention.""This is in short what the contemporary world is like, except the billionaire is the broader class of high earners and the beggars are wealthier than in India. Instead of begging, there is a large class of people trying to command our attention using modern technologies such as email, spam, AI-targeted advertisements, coupons, Groupons, direct mail, advertising supplements in your credit card bill, and flashing ads on the Internet, among hundreds of other techniques...getting attention will continue to be a critical function in the new world of work and is likely to require ever-greater effort and sophistication."

Billionaires and beggars? Nice analogy for the new economy. Millions clamoring for their attention and table droppings. Doesn't sound like a very "efficient" economy now does it? Does that seem like a good use of natural resources or human capital? Are you ready for even more intense advertising (is that even possible?)

The other thing digital technologies aren’t very good at is human interaction and motivation. Thus he sees the rise of a new servile class of motivators and coaches to motivate the one percent to “achieve” even more, along with educational tutors, personal chefs, personal trainers, event planners, and other assorted toadies to the new aristocracy as a major job growth field for the new underclass - just like Downton Abbey, except you live alone and have to pay for everything yourself.

"High-skilled performers, including business executives, will have some kind of coach. There will be too much value at stake to let high performers operate without a steady stream of external advice, even if that advice has to be applied rather subtly. Top doctors will have a coach, just as today's top tennis players (and some of the mediocre ones) all have coaches. Today the coach of a CEO is very often the spouse, the personal assistant, or even a subordinate, or sometimes a member of the board of directors. Coaching is already remarkably important in our economy, and the high productivity of top earners will cause it to become essential."

Pervasive automation will have other knock-on effects. Everyone will be continually monitored and tested by digital overlords, from birth to death. Your productivity will be ruthlessly monitored 24-7 and regularly tested, so that even a slight trip up will cast you down into the underclass if you can’t keep up. If you have visions of a fluorescent-lit digital cubicle sweatshop where employees labor away under a tireless all-seeing eye watching every move for the benefit of the owner class in the executive suites, well, so do I. Since this affects his class, Cowen manages to muster a bit of sympathy for these workers, unlike the rest of us. Even the “winners” will be losers in this new system. I imagine much higher rates of drugs to keep up and ameliorate the psychic effects of this digital tyranny (Adderall, Provigil, Paxil, etc.). This measurement and sorting of the economic sheep and goats will begin frightfully early, so your economic destiny will probably be determined by age 7-8 or so, if not earlier, so if you aren’t a genius by age 7 or don’t fit well into the school system from an early age, well, get ready to stack shelves or work the deep fryer. While obscure prodigies will rise to the top thanks to this (Cowen relies on a sole example of an obscure Mongolian math genius), for most of us, Cowen warns ominously, there will be “far less second chances.” Our “permanent record” will follow us from birth to death, determine everything about our lives, and be uneraseable and inescapable.

"Another development is this: The better the world is at measuring value, the more demanding a lot of career paths will become. That is why I say 'Welcome to the hyper-meritocracy' with a touch of irony. Firms and employers and monitors will be able to measure economic value with sometimes oppressive precision."

But there’s a silver lining here, Cowen assures us. Digital technology means lots of opportunities for “cheap fun and cheap entertainment” for a new class of digital bohemians and vagabonds. Couchsurfing, AirBnb, Uber, Reddit, Wikipedia, Khan Academy, Netflix, Hulu, blogs and podcasts, - there’s plenty to do inside your tarpaper shack or parents’ basement, thanks to the Internet, provided by free municipal wireless. It could even be culturally vibrant, just like Latin America. After all, America’s cultural hub, New York City, has the same income inequality as sub-Saharan Africa. It’s rather bizarre to see a libertarian economist suddenly do a 180 and invoke the “experiences are worth more than money” argument, since libertarian capitalism has depended upon the fact that it provides mountains of inexpensive food and consumer crud for people to buy as its main justification for a century or so. One is reminded of the eighteenth-century English aristocrats who rode through starving villages in their carriages with a perfumed kerchief over their noses, remarking on the jollity of peasant life with their harvest festivals, drinking and merrymaking, ignoring the fact that the peasants also lived in hovels, slept in straw, ate nothing but gruel, and died prematurely.

Extensive in-migration to the Sunbelt leads Cowen to conclude that Texas is the future of America – cheap automobile-dependent suburban sprawl, dilapidated infrastructure, lousy schools, threadbare public services, high user fees, and low, low taxes. Because people are “voting with their feet” by moving to Texas, he concludes that people prefer “more money in their pockets” thanks to low-cost suburban sprawl and low taxes, rather than good government services (or even honest, competent government). I would interject that the increasing “Dixiefication” of America means people have less choice in this matter than ever before. The “race to the bottom” means that states with this philosophy have a comparative advantage, and people will move where the jobs are, regardless of what they may really want, especially if the weather is good. The explosive growth of San Antonio/Ciudad Juarez is touted as an example of how economically vibrant cities attached to impoverished shantytowns can lead to the successful cities of the future.

"Since there is considerable net in-migration to Texas, I conclude that a lot of Americans would rather have some more cash than better public services...Many Americans will end up living in areas with cheaper housing and lower-quality public services, if only to give themselves more cash in their pocket. Some of those areas might be a bit ugly to the eyes, again as a trade-off for lower costs. As a cross-country moving proceeds, and changes what we are, the United States as a whole will end up looking more like Texas."

"When I visit Latin America, I am struck by how many people there live cheaply. In Mexico, for instance, I have met large numbers of people who live on less than $10,000 a year, or maybe even less than $5000 a year. They hardly quality as well-off but they do have access to cheap food and very cheap housing. They cannot buy too many other things. They don't always have the money to bring the kid to the doctor or to buy new clothes. Their lodging is satisfactory, if not spectacular, and of course the warmer weather helps."

"What if someone proposed that in a few parts of the United States, in the warmer states, some city neighborhoods would be set aside for cheap living? We would build some "tiny homes" there; tiny homes that might be about 400 square feet and cost in the range of $20,000 to $40,000. We would build some very modest dwellings there, as we used to build in the 1920s. We would also build some makeshift structures there, similar to the better dwellings you might find in a Rio de Janeiro favela. the quality of the water and electrical infrastructure might be low by American standards, though we could supplement the neighborhood with free municipal wireless (the future version of Marie Antoinette's famous alleged phrase will be "Let them watch Internet!"). Hulu and other web-based TV services would replace more expensive cable connections for those residents. Then we would allow people to move there if they desired. In essence, we would be recreating a Mexico-like or Brazil-like environment in part of the United States....Many people will be horrified at this thought. How dare you propose we stuff our elderly into shantytowns? Maybe they are right to be upset, although recall that no one is being forced to live in these places. Some people might prefer to live there...

"The most extreme low-rent move is to go 'off the grid.' For all the technological progress we have seen, a growing number of Americans are disconnecting from traditional water and electricity backups and making their own way, often in owner-built homes, micro-homes, trailer parks, floating boats, or less elegantly in tent cities, as we find scattered around the United States, including in Portland, Seattle, and Los Angeles. Some of these options are gruesome, but many people are doing it by choice. New technologies, such as powerful local generators and solar power, are making it easier to strike out on one's own."

"There is one final way we will adjust to uneven wage patterns and that is with our tastes. Many of society's low earners will reshape their tastes--will have to reshape their tastes--toward cheaper desires. Caviar is an expensive desire and Goya canned beans is a relatively cheap desire. Don't scoff at the beans: With an income above the national average, I receive more pleasure from the beans, which I cook with freshly ground cumin and rehydrated, pureed chiles, Good tacos and quesadillas and tamales are cheap too, and that is one reason they are eaten so frequently in low income countries."

"Just as some poorer people will do without fancy infrastructure, so will others do without advanced health care. Since we won't be willing to pay for full-benefit Medicare and Medicaid for everyone who will need it, some people will see cut benefits or rationed access to doctors. Our political system will try to construct that rationing so that voters blame the doctors rather than the politicians, but one way or another rationing will increase. Imagine many more millions of people wishing to see a doctor and having to wait weeks or months to do so."

So slums, sprawl and shantytowns with decaying infrastructure will be where people "prefer" to live. Funny how very few Americans "preferred" to live in dilapidated shantytowns and favelas from 1950-1979. Well, I guess tastes change. Remember, nobody's forcing you to sell your plasma to pay the rent.

As the rich get richer they will become even more influential. The political class will increasingly cater to their needs while turning a blind eye to the exploding poverty of most Americans, pretty much as they do now. The realities of automation and robots causes Cowen to be much less hostile to redistribution than most of his libertarian brethren, but he nonetheless doesn’t think it will happen due to the influence of the rich on politicians. Throughout the book, he makes reference to this realpolitik dynamic, saying that, even though it may not lead to the best outcomes, the needs and desires of the elderly and wealthy elites will rule the day to the detriment of everybody else.

Throughout the book, the right-wing belief in ‘Meritocracy” is constantly invoked. This is a standard article of right-wing libertarian belief, arguing that the winners at the top of society deserve their wealth and position through superior talent or merit, and the losers (the vast majority), are less talented, conscientious, motivated, etc.. Thus, it is a just world where people earn exactly what their talents give them, no more and no less, with the most talented benefiting most of all, Interestingly, on his blog, Cowen has been waging a one-man crusade against Thomas Piketty’s new book, Capital in the Twenty-First Century. This may seem bizarre, since they both paint a picture of the future that is very similar – a tiny fantastically wealthy elite lording over a precarious and immiserated working class, with ever-increasing disparities in wealth. The crucial difference is that Cowen depends on his elite being “deserving” of their elevated status by being smarter, more talented, harder working, etc., while Piketty claims that inherited wealth will be the prime determinant of the new overclass. Cowen’s inequality is caused by income, not wealth as in Piketty, and income is earned by their awesome marginal productivity, and not because of inherited wealth or systemic advantages. Thus, Cowen is not overly bothered by the new social order, since it is a true "hyper-meritocracy."

Two points should be made here. One, Cowen is an academic who, as far as I can tell, has been in academia his entire life. The academic world he has lived his entire life in, and has played so well, is much closer to this meritocratic ideal then most of society (outside of the military), so I think Cowen has a major blind spot here. For example, see this: Secret Handshakes Greet Frat Brothers on Wall Street. American society is based on realities of class and wealth, and the biggest determinant for most people will not be talent (which will play some role, certainly), but who your parents are, leading to a much more sclerotic society with low social mobility, in line with Piketty’s predictions. After all, without jobs, what ladder rungs will there be to raise your status? Somehow I doubt “online classes” will fix this. And, as Thomas Frank has pointed out, colleges, which were designed to ameliorate class distinctions, are now the chief enforcer of class distinctions in America. The stratospheric cost of higher education will make sure that the jobs of the future will only be available to the already wealthy, and a few rare exceptions will be thrown in our face to “prove” this is not the case.

Second, even if we are headed to the meritocracy that Cowen claims, Christopher Hayes' Twilight of the Elites: America After Meritocracy points out that this will probably lead to more incompetence, inferior leadership and corruption, just as it has for the past few decades. The “best and the brightest” have presided over an unprecedented erosion of society, institutions and social trust, along with increasing chaos, wars, dissolution and poverty around the world. Because they are insular, these meritocrats feel that what’s good for them is good for everybody. And because they have been told that they are “superior” their entire lives, they believe they are infallible and entitled to everything. Plus, as Hayes points out, elites will rig the system to keep themselves and their friends and family on top - in other words, to "pull the ladder up after them." We can see that this is already happening.

And won’t the newly impoverished formerly middle classes rise up and revolt in their favelas? Nope, says Cowen, and although I find his arguments incredibly depressing, I also find them convincing. First, the baby bust means that the population is getting older, and older people don’t fight the system. Since America gives benefits disproportionately to the elderly (free health care, social security, etc.), they will have more invested in the status quo. Second, the crime rate has been going down, not up, even as income and wealth inequality has skyrocketed over the past thirty years. Finally, people don’t envy the rich, according to Cowen, they envy their immediate friends and neighbors. Facebook has caused more consternation over inequality than anything else, he claims. The poorest areas of the country are becoming more conservative, he points out, seemingly oblivious to the millions of dollars spent every year to maintain this result.

"For all the prognostications about the American future, the most important single fact, and the easiest to predict, is simply that we will be a lot older. That will make us more conservative, in this case referring to the literal rather than political sense of that term. Revolutions and protests are the endeavors of young hotheads, not sage (or tired) sixty-four year olds. The societies with lots of unmarried young men are the most vulnerable to sudden revolutions and major political changes...Societies have a strong staus-quo bias, particularly if they have high status relative to other parts of the world...If you're trying to measure the scope or potential for social disorder, look at the rate of crime. In the United States crime rates have been falling for decades and in recent times they have surprised researchers by falling even faster than expected. Yet over those same decades income and wealth inequality have been rising significantly in the United States....It's again worth seeing what is happening, politically speaking, in the parts of the United States with relatively stagnant incomes. Political conservatism is strongest in the least well-off, least educated, and most economically hard-hit states...As Richard Florida puts it, 'Conservatism, more and more, is the ideology of the economically left behind.'...If you think about it, we really shouldn't expect rising wealth inequality to lead to revolution and revolt. That is for a very simple psychological reason: Most envy is local...Most of us don't compare ourselves to billionaires."

Obviously, the U.S. government does not share Cowen’s placidity. Since 2001, we’ve witnessed the construction of a vast and unprecedented police/surveillance state in the U.S. and around the world. Many have made the obvious point that governments seem to be preparing to face their own people as adversaries much more than any foreign invasion, and they have pointed to the extreme inequality that Cowen is describing as the chief culprit. For example: Defence officials prepare to fight the poor, activists and minorities (and commies). (The Guardian) And see this:

After the U.S. Postal Service finalizes its purchase of "small-arms ammunition," it will become only the most recent federal agency to make a large purchase of bullets for its armed agents (who are perhaps more numerous than the public realizes). In the last year or so, reports have surfaced that the Social Security Administration ordered 174,000 hollow-point bullets, the Department of Agriculture 320,000 rounds, Homeland Security 450 million rounds (for its 135,000 armed agents), the FBI 100 million hollow-points, and even the National Oceanic and Atmospheric Administration 46,000 rounds. (In May, the Department of Agriculture added an order of submachine guns and body armor.) [Newsmax, 4-14-2014] [Washington Times, 5-16-2014]

Cowen has been accused by many of “moral indifference” due to his clinical and calloused description of America's future. Cowen argues that a prognostication of the future based on what’s actually happening is best served just by an unemotional interpretation of the facts without trying to interject one’s personal opinions. In this interview, for example, he says:

...I think 'pessimistic' and 'optimistic'--they are words everyone in this debate is applying too quickly. I think in this debate the radical thing to do is to write a book which isn't trying to be too normative; just try to think through what will things be like. And by keeping the evaluation at much more of a distance I think we'll actually get further with the analysis. ... I've had people confront me in outraged fashion: How can you accept all of this? But look: as a writer the point is to try to figure it out as best you can, and at the end of the book if one wants to say, let's not go that route, well that's worth a discussion. But the notion that at every intermediate point you have to inject your emotional outrage I think has become one of the worst features of this whole debate.

I’m sympathetic to this view. I write about a dark future all the time, and it’s not things I want to happen. In fact, it’s mostly things I don’t want to happen. To be fair, Cowen never states that this new world he’s describing is ideal or desirable, just that it’s the scenario that he sees as most likely if current trends continue. I agree, which is why I’m reviewing the book. It is, however, difficult to escape the conclusion that Cowen’s lack of agitation at this future is due to his class position. This new digital future will be great for him and his family. I imagine the target audience for this book are right-leaning pro-market libertarians who will see themselves as the big winners in the new economy, and naively believe that they and their families will escape falling into the underclass by staying ahead of the curve by following Cowen's sage advice.

But in the end, it will all turn out okay, he assures us, once we've finished sorting ourselves out into our new permanent caste system and fully integrated the new technologies into our social order. The nouveau-poor will learn to live with less and enjoy all the new digital distractions, while the rich, well, they'll be the new benevolent ruling class.

"The American polity is unlikely to collapse, but we'll look back on the immediate postwar era as a very special time. Our future will bring more wealthy people than ever before, but also more poor people, including people who do not always have access to basic public services. Rather than balancing our budget with higher taxes or lower benefits, we will allow the real wages of many workers to fall and thus we will allow the creation of a new underclass. We won't really see how we will stop that. Yet it will be an oddly peaceful time, with the general aging of American society and the proliferation of many sources of cheap fun. We might even look ahead to a time when the cheap or free fun is so plentiful that it will feel a bit like Karl Marx's communist utopia, albeit brought on by capitalism. That is the real light at the end of the tunnel. Such a development, however, will take longer than I am considering in the time frame of this book...One day soon we will look back and see that we produced two nations, a fantastically successful nation, working in the technologically dynamic sectors, and everyone else. Average is over."

Reactions have been predictably hostile from both the left and the right. The left's reaction is obvious. After giving his description of future America on NPR's On Point, the host incredulously asks whether his vision is exactly what European Americans' ancestors came across the ocean to escape. It's a valid question, especially since social mobility and middle class living standards are now higher in "socialist" Europe then in America.

The reaction on the right has been more complicated. A standard tenet of libertarian belief is that 1.)Inequality is not happening, and/or 2.) Capitalism always makes the average person better off, and if it fails to do so, it is always and everywhere due to some sort of government interference in the infallible market (taxes, regulations, subsidies, etc.). In the interview cited above with another libertarian economist from George Mason University (Econtalk is also part of the Koch Brother's empire), the host says early on, "So, I think you know I'm somewhat of a skeptic about the inequality
data--that I think it's distorted by changes in family structure,
immigration, and other factors...." One wonders how sheltered a life this man leads. It proves Upton Sinclair's adage that "It is difficult to get a man to understand something when is salary depends on him not understanding it." But the biggest challenge is that Cowen's book makes the case that the natural workings of the capitalist economy, without major government interference, will make most people far poorer and worse off, rather than some big-government bogeyman. It's a direct challenge to the standard right-wing tenet that allowing the rich to accumulate without bound will lead to better lives for all. Hence the hostility.

One of the most hostile reviews came from, or all places, The Wall Street Journal. The reviewer writes:

If this were Swiftian satire, Mr. Cowen could retire the Best Deadpan Award. But it isn't. It's a prediction coupled with the injunction that resistance is futile. There's nothing we can do, says Mr. Cowen, to avert a future in which 10% to 15% of Americans enjoy fantastically wealthy and interesting lives while the rest slog along without hope of a better life, tranquilized by free Internet and canned beans.

Bread and circuses is not the policy of a republic, but rather of an empire entering moral senescence. Nonetheless, Mr. Cowen seems untroubled by his hyperpolarized vision....Whether by accident or design, Mr. Cowen's book represents a fundamental challenge. To government-hating, market-worshiping conservatives, it poses a question: If this is the consequence of your creed, are you prepared to endorse it? To liberals and progressives: What are you going to do about it? And to all of us: Is this a country you would want to live in? I know I wouldn't.

Finally, I have been struck by certain similarities between Cowen’s vision of the future and Ran Prieur’s latest thoughts on the future of America. It’s hard to think of two more different prognosticators, yet their visions seem to be converging, although to be sure Ran places much more emphasis on Peak Oil and resource scarcity, while Cowen has apparently bought into the shale-gas and fracking revolution hype.

Both predict continual improvement in digital technology and automation, with most people getting poorer and poorer, as the middle class vanishes. Both predict a future in which downtrodden Americans will live on a few thousand dollars a year in Latin-American style poverty in slums and shantytowns at the margins of society, yet have access digital gadgets straight out of Star Trek. Both predict a future of mass unemployment where people work outside the money system to survive via barter, tent cities, and dumpster diving. Both predict that the system is locked down tightly, and mass uprising is unlikely, if not impossible. Both predict a future where working a “conventional” job gets more and more oppressive as digital technologies monitor workers like feedlot cattle. Both predict that people will be desperate to somehow sell stuff to, get the attention of, or become some sort of servant, to the upper class, because they will be the only ones with money. Both predict that accumulating "stuff" will fall by the wayside compared to experiences, and that digital technology will lead to a new class of bohemian/hippie types who will live on the fringes of society using the Web to entertain themselves and seek out low/cost free stuff. Both predict that people will anesthetize themselves from their poor and meaningless lives by retreating into an increasingly virtual reality while turning their back on the real one which offers them so little. No word on Ran's position on canned beans, however:

I expect artificial intelligence and biotech to spice up a decades-long economic depression as the global system muddles through climate change and the end of nonrenewable resources. Low quality manufactured items and industrial food will remain affordable, but good food, transportation, and services from actual humans will be more expensive. I think the best place to live is in a small house with a big yard in a city with a seaport or railroad hub. You want to be close to the supply lines, but have enough land to grow luxury foods like blueberries and good tomatoes. As you move farther into the country, the money you save by growing more of your own food will be less than the money you spend on transportation and shipping. Total self-sufficiency would be a good thing to write a novel about.

My generation was the first in American history to be poorer than our parents. Now the Millennials are poorer than us, and this trend will continue until the global infrastructure adapts to feed from a growing base of renewable resources, maybe around 2060. Meanwhile, if you can stay out of debt and find a low-stress job to build up savings, you'll be relatively well off. "Debt" is exactly as real as we believe it is. Mostly it's a trick to make people feel ashamed that they have no political power. Not that it would work any better if we felt angry. The system is totally locked down, and the most revolutionary political change of the 21st century, the unconditional basic income, will be necessary to keep the system stable, to turn the unemployed majority from hungry militants back into consumers.

Technology will promise revolution, but in practice ninety percent of the new powers will be used to keep the remaining ten percent from doing anything dangerous. By the year 2200 there will be no poverty, no disease, and no opportunity for anyone to make a difference, except by more quickly closing off the opportunity for anyone to make a difference. Reasonable people will know that they're better off than we were, but still fantasize about living in our time. Suicide will be the leading cause of death, and by 2300, any death not from suicide will be global news. By 3000 we will either be extinct or moved to another level of reality through some technology of consciousness that would seem completely loony if you described it today.

Ten years ago, when I imagined "collapse", it was interesting: industrial collapse means there are no factories and everything new is made by hand. Infrastructure collapse means there are no electric grids and we're riding horses on the ruined freeways. Economic collapse means the banks are just gone, cash is worthless, and economies are gift and barter. Political collapse means you don't have to pay taxes, kids don't have to go to school, and there are no police. Now it's increasingly clear that none of these things are going to happen, even slowly over 100 years...

Now, there are possible technologies that are truly revolutionary. But my fear is that they will all be stopped, that the increasing power of the tech system will be used to keep the world stable and predictable, and to make us happy in the shallowest and least satisfying way. To avoid this dreadful fate, we need a cultural shift in which we gain a deeper understanding of quality of life, and we need to apply this understanding to technology, and start using it to increase danger and pain. I know, people in Africa would love to have the problem of not enough danger and pain. Don't worry -- in a hundred years, they will, and we'll have it worse than we do now.

If the tech system can adapt to resource exhaustion, we might emerge into a high-tech utopia/dystopia, in which it's easy to be comfortable but difficult to be happy. Social class will no longer be about power or even standard of living, but valuable activity. The upper class will hold the few important jobs that still require humans. The middle class will be hobbyists, practicing difficult skills that are not necessary for society. And the lower class will be content to consume entertainment.

I no longer expect any kind of tech crash, except that resource-intensive benefits like driving and eating meat will become more expensive and less available to poor people. Economies will collapse as they adjust to decades of zero or negative growth, weaker nations and businesses will fail, but computers will continue to get stronger, and automation will adapt to resource decline by becoming more efficient and better able to compete with human workers. At the same time, no government that can possibly avoid it will allow its citizens to starve, so there will be even more subsidies for industrially produced human dog food.

Over the next few decades I see the global system passing through a bottleneck as it shifts from nonrenewable to renewable resources...I imagine an airtight sci-fi utopia/dystopia, where almost everything will be automated, nobody will have to do any work, everyone will be comfortable and safe, and we will have amazing powers to entertain ourselves. Other than that, we will have less power than any people in history or prehistory. The world will be lifeless and meaningless, a human museum, a suicide machine.

I expect global economic collapse and decades of poverty while we switch from fossil fuels to renewable energy. Extreme poverty will cause political upheavals, but not such a deep political collapse that you won't have to pay taxes. And I expect little or no technological collapse. Even energy-intensive technologies like cars will not disappear, just shrink to serve the elite. And I think information technology will continue its present course, so people with gadgets out of Star Trek will be digging up cattail roots for food.

I'm going to say that liquid fuels continue to decline, renewable energy cannot replace them nearly fast enough, and everything that now depends on liquid fuels gets much more expensive. This contributes to decades of zero or negative economic growth. Another contributor is the de-monetization of labor: a lot of the economic growth of the 20th century came from taking labor that used be outside the money economy, like child care and food preparation, and bringing it into the money economy. This is going to reverse as people lose their jobs, do stuff at home for free instead of paying other people to do it, those people lose their jobs, and so on.

New money-making opportunities will be snatched by whoever is in the best position: mostly the already rich. So wealth inequality will increase, and the cost of good food and human labor will continue to rise, until only the rich can afford to buy much of either. Meanwhile manufactured items and low-quality industrial food will remain cheap.

So you won't be in danger of starving, but you're likely to find yourself deep in unpayable debt, squeaking by on government assistance, and struggling to find something to sell to the rich so you can afford to buy small luxuries to make your life tolerable.

In summation, what fascinates me about the book is that it is so–far the best and most thought-out description of the future we have termed Neofeudalism. If you want to give someone a description of what the Neofuedal society looks like, hand them this book. Barring change in course, this is where I believe we’re headed as a society. In short:

Most people desperately fighting over table scraps and crumbs dropped from the tables of the wealthy.

A vast servant class dedicated to catering to the needs of the wealthy in some form and dependent upon their largess. (servants, coaches, tutors, gardeners, consultants, baristas, musicians, etc.). These will not be live-in servants, but wage earners in businesses that depend on the enormous incomes of a small class of privileged people - think service industries in San Francisco.

All of society’s wealth is funneled to a small wealthy stockholding elite. Little to no savings or wealth accumulation for most people. Low social mobility enforced by stringent educational requirements, credentialism, low economic growth and saturated markets.

No health care or retirement for most people.

An ineffective and incompetent government that provides very little for the common general welfare, but exists mainly to uphold elite interests (armies, police, intelligence, contract enforcement, corporate subsidies, banks, patents, bare-bones infrastructure, etc.)

The poor left mainly to fend for themselves. Slums, shantytowns, favelas, tent cities, trailer parks and hovels abound. Suburbia will become “Slumburbia”

Weak nation states depleted of funds. Corporations will rule. Most wealth will be offshore and untaxable.

Everything owned by wealthy elites and appropriated though the market rather than common goods. Public libraries, transportation, museums, parks etc. abolished. Most people will pay through the nose to rent these services from the 10-15% wealthy elites. Those who can’t afford them will go without.

More social dysfunction due to lack of opportunities.

Municipal services curtailed or abolished except in wealthy areas.

Employees will get their needs (health care, dental transportation, etc.) by contract through their employer (e.g. Google campus and buses). Those without employers will have nothing.

Notable differences from feudalism:

Warring corporations rather than warring states. Combat will be done in the boardroom, not the battlefield. Battles will be for market share rather than territory. Wealth will be stocks and bonds rather than land.

Elites will be transnational and have more common interests than in the past. It will be their own fellow citizens they will need to violently contend with.

Living standards for the poor will be higher than the middle ages. In wealthy countries, few will starve. Most will still have some sort of shelter, although less and less people will own their property.

People will not be tied to the land, as with serfdom. They may end up tied to their jobs, however, to keep their benefits, especially since there will be few options to change jobs thanks to oligopolies, cartels, non-compete clauses, and extreme specialization. Less job mobility outside of the 10-15% due to fear of unemployment.

Lower family formation and decreased birthrates.

People will be watched and continually monitored (drones, cell phones, etc.) far beyond the wildest imagination of the most absolutist czar, monarch or emperor.

Most people will be economically “redundant” i.e. they will not be needed to produce food and fodder for the elites.

Vast prisons, which were unfeasible in medieval times, but less outright torture and general lawlessness.

People will live longer than their medieval counterparts, but with more chronic diseases.

Obviously, much more entertainment, activities, geographical mobility, and so on. As long as you don’t threaten elite power or control, you will be mostly left alone.

Relations between people mediated by money and the market rather than webs of reciprocity.

People will not live off the land – land will be owned by the wealthy.

It's not so far-fetched. Cowen himself says on pp.253-54, "There are many other historical periods, including medieval times, where inequality is high, upward mobility is fairly low, and the social order is fairly stable, even if we as moderns find some aspects of that order objectionable."

Serf's up!

NOTES

* Libertarians use as their justification for the low taxes and unlimited accumulation by the wealthy elite the fact that this leads to “growth' and that if the wealthy pay taxes like the rest of us, growth will be diminished and we all be hurled into poverty. In addition, making the pie bigger is used to avoid any question of redistribution. The richer the rich get, the better off even the poorest will be, the argument goes. Thus to question growth goes against the standard libertarian party line.

** To make his point, he initially published the book only in eBook format.
eBooks are very useful – cheap to download, easy to carry around with a
Kindle or Nook, but don’t really add much more to GDP than a
“conventional” book.

*** This is off-topic, but Cowen picks this example because he was a youth chess prodigy. Many prominent economists are chess players. It’s easy to see why chess as the ultimate training for economic thinking. Human beings are treated simply as abstractions who behave according to predictable laws (pawns, knights, bishops, queens, etc.), and whose actions follow predicable rules. A chess game, like an economy, although it exhibits a degree of uncertainty, can be regularly determined by mathematical laws, hence chess-playing computers. Thus the kind abstract mathematical reasoning that leads people to be good at chess also motivates them to become economists, where they see the economy as one giant chess board, with all of us as mere interchangeable pieces making predictable moves that can be abstracted through sufficient mathematical equations.

**** A superior example would be from my own field of architecture. We used to draw on paper by hand. Then we drew digital lines on computers. Now, small teams can visualize and model entire buildings in 3D and build off of that. The shift is to less people with higher levels of building/construction knowledge. Consequently, there is much less need for "drafters," entry-level jobs are harder to come by, and the well-connected can do more work with less labor than ever before.

9 comments:

I'm only online about once a week and the Internet is becoming more and more "read only" as most pages are impossible to make comments on.

I just want to say you're doing excellent work here and I download and save all your posts for later reading.

I'm not in some backwater; the backwaters I've been in have a much smaller rich/poor divide and the internet access has always been decent. I'm in San Jose, California, an area noted for high-tech. As long as you are rich.

All of this Jetsons stuff takes an absolutely stupendous amount of energy to maintain. Low Tech Magazine has quite a few articles about this, about the staggering amounts of energy it takes to do computer aided manufacturing, make cell phones, etc. This is the elephant in the room everyone ignores.

What we seem to be headed toward is a society like Brazil, where 10% of the population drives cars, and 90% does stuff like growing and harvesting sugar cane to make ethanol to run the cars on. It's worked for Brazil so far because cars and hi-tech stuff can be imported from not-yet-collapsed countries like Japan and the US. But when all the leading countries have 10% well to do and 90% poor, things like cars are no longer going to be maintainable. It will be things more like rickshaws and human porters carrying stuff for you etc. At best, we'll end up with Tokugawa-era Japan. More likely, we'll end up with the sort of rural England James Harriot of "All Things Bright And Beautiful" etc wrote about. A bitterly poverty-stricken society where a farmer will stay up overnight in the cold massaging a cow's udders because if he loses the cow, his family starves. And one is a pretty important mucky-muck if one has a bicycle to get around on.

Makes me happy (sorta) that I'm 78 years old and won't see the end of 'civilization as we know it'. But my grandkids will, and I feel sorry for them unless they forego skateboards for blacksmithing and herbal medicine.

Here's a way to take personal advantage of what is coming. Don't have kids. The current welfare system for kids is going to be drastically curtailed in the future, and so there will actually be more like 3 tiers: the top 15%, those in the lower 85% without kids (who will have happy lives eating beans and soylent and playing with electronic gadgets), and those in the lower 85% with kids (who will have miserable lives).

Making the lower 85% with children suffer is by intention. Unlike China, democracies are very unlikely to impose a one child type policy. Instead, those of the lower 85% who produce too many children will be jailed as child abusers because they can't feed their children properly. Warehousing people of reproductive age in single-sex prisons will forcibly stop them from reproducing.

Don't have children. Sterilize yourself, have lots of non-reproductive sex, then get a cat or dog to satisfy your nurturing desires.

Given global birth rates in the developed world,we might well dodge this ugliness. Every single developed and most undeveloped nations are below replacement and while the US is only close,this is because of a policy of ignoring low IQ illegal immigration from higher fertility countries.

Heck the US Is already bringing in Central Americans because we ran out of Mexicans. It won't be that long before they join the low fertility club as well. Brazil, fertility central in the 70's is there already

This population drop will not only solve a lot of problems of human suffering but will also reek havoc on the systems the rich use to stay rich.

Without a middle and with a shrinking poor they'll have no one to sell to save the lowest IQ or drop out religious communities

Assuming they can keep it up for a while, it will certainly be a dystopia,perhaps like the Corporate Congress from the TV Show Continuum but its not sustainable.

Heck they may not be able to maintain it and speaking for the US right now, essentially we can't maintain much of our infrastructure including in rich areas. Given a middle class population decline its entirely possible the very skills needed for society will vanish. You'd think it would be easy to preserve them but even with the Internet its not

My long term guess is a period of technological dystopia, a huge population decline and something akin to Kunstler's A World Made by Hand usnless we ger very smart and lucky

"If current trends continue..." The trends Cowen sees as important will be swamped by peak oil and climate change. Large centralized entities will have a hard time exerting dominance. I don't see how it will be peaceful. Civilian firearms outnumber government firearms by 100 to 1.

Thanks for writing this summary. No one writing on what the future looks like is going to nail it perfectly . The important thing is see where current trends are likely to take us. By the sounds of your review Cowen dose a good just of getting us to see some of the consequences of current actions. And certainly Neofeudalism is a concept we will all become familiar with as time marches on.

Here, you quote, "And I think information technology will continue its present course, so people with gadgets out of Star Trek will be digging up cattail roots for food."

I remembered this today as I found this articlehttp://civileats.com/2014/12/05/foragers-delight-can-wild-foods-make-city-dwellers-healthier/

"Foragers’ Delight: Can Wild Foods Make City Dwellers Healthier?

"...Carlson, an enthnobotantist in UC Berkeley’s Department of Integrative Biology, is one of three researchers funded by the Berkeley Food Institute to study the prevalence, nutritional value, and potential toxicity of wild foods—AKA weeds—commonly found in urban neighborhoods in the East Bay. Their thinking is, people who lack access to healthy foods rarely get enough micronutrients and fiber. Could wild edibles, which are sustainable and potentially abundant, be a reliable source of fresh, free, and nutritious food?

"...Carlson and Stark are encouraging their students to use the mobile app iNaturalist to crowd-source the data collection over the course of the next year. A record of what and how much they’ve found thus far can be found at forage.berkeley.edu."

I have thought for a number of years that the best presidential campaign pledge would be to improve life for poor people in America- because we are going to have more and more of them. But I don't think that you could get elected on that. Too much denial going on and blaming the poor.